RESPONSES TO SIAS QUESTIONS ON NEO GROUP LIMITED S ANNUAL REPORT FY2016

Transcription

1 RESPONSES TO SIAS QUESTIONS ON NEO GROUP LIMITED S ANNUAL REPORT FY July 2016 Ne Grup Limited ( NGL ) has received questins frm Securities Investrs Assciatin (Singapre) ( SIAS ) relating t the Annual Reprt fr FY2016 as part f their initiative t imprve the quality f Annual General Meetings ( AGM ). Our respnses t the questins are as fllw: 1. There are hints in the annual reprt abut the grup s strategies such as fully integrated catering slutins prvider, synergistic acquisitins and ging glbal. Besides slidifying the lcal leadership psitin in catering, culd the Bard share with sharehlders the lnger term visin fr Ne Grup Limited ( NGL ) in greater details? What wuld NGL lk like in 5 years time? And in 10 years time? Respnse: Overall, in the lng-term, while Fd Catering will remain ur cre business fcus, we ve recently acquired TS Grup and CTVeg Grup, bth leaders in their respective industries, which will allw NGL access t a sizeable distributin netwrk acrss 29 cuntries. We hpe t leverage n this glbal netwrk t prudently exprt ur prven business mdel int new markets and capitalise n grwth pprtunities bringing lcal tastes t glbal markets; Indeed, NGL has ver the years priritised rganic grwth thrugh capturing greater market share by leveraging n ur ability t prvide cmprehensive end-t-end fd and catering slutins thrugh ur vertically-integrated value chain, strng prtfli f brands that appeals t varius market segments and ur established track recrd. In 2016, we have nce again maintained ur psitin as Singapre s N. 1 Events Caterer with 14.7% market share in a S$409 millin events catering market, accrding t a reprt by Eurmnitr dated April 2016; In the near-t-mid term: We cntinue t d what we d best t cnstantly push bundaries t ffer differentiated value t ur custmers, t maintain the strng grwth trajectry f ur cre Fd Catering business; cnt d Page 1 f 5

2 We are als wrking n strengthening ur recurring incme streams by pursuing mre crprate clients and venue partnerships, as well as the creatin f new and recurring B-t-C incme streams, such as bringing TS flagship prducts directly t cnsumers; Inrganically, thrugh synergistic upstream acquisitins, ur surcing capabilities have been strengthened cnsiderably, which brings alng benefits such as diversificatin f incme streams, ecnmies f scale and cst savings. Fr instance, CTVeg Grup nw meets 100% f Ne Grup s fruits and vegetables needs, giving us better cntrl ver cst and quality f supply, and reducing ur cst by 20%. We will cntinue t be n the lk-ut fr synergistic value-accretive M&A targets that cmplement ur businesses, fr us t strengthen ur value chain t prvide cmprehensive fd and catering slutins t ur custmers; On the peratins frnt, we have always taken pride in being at the frefrnt f driving efficiency and prductivity thrugh autmatin and innvatin. With the help f TS Grup s expertise in Fd Manufacturing, we are gradually upgrading ur kitchen prcesses t achieve full autmatin that will als bst fd cnsistency. We are als cmmitted t uphld the best fd safety standards all ur kitchens are ISO accredited, adhering t internatinal fd management system standards and each kitchen unit has a dedicated Fd Safety Officer. 2. Specifically n the acquisitins CTVeg Grup and the prpsed acquisitin f U-Market/JCKC bth appear t be immediately accretive, are synergistic t the cre business and CTVeg, especially, was acquired at a gd price. On the ther hand, TS Grup, as a surimi based fd-manufacturer, des nt appear t be significantly synergistic t NGL s cre business. What are the new insights gleaned frm the surimi/manufacturing business since the acquisitin twelve mnths ag? Can the management share the cncrete plans t turn TS Grup arund? Wuld the recent purchase f the larger prperty at 22 Senk Way ver-cmmit the grup twards surimi/fd manufacturing and the exprt business? The cncern is that t much f the grup s limited resurces (including management time) will be diverted away frm the cre catering business which still generates the highest prfit margins. Respnse: As fr every acquisitin, back-end integratin and the turnarund f TS Grup s bttm line requires sme gestatin time befre the results f which can be reflected in NGL s financials. Relating t TS Grup s lsses, we have put bth tp line and margin-accretive turnarund strategies in place as fllws: cnt d Page 2 f 5

3 Tp line: Creatin f new, recurring incme streams explring pprtunities t bring TS Grup prducts, including ppular DD brand f fish balls, directly t cnsumers (B-t-C), such as the new retail cncept stre, Kang Kar N. 1 Ndles and the launch f new cnsumer prduct lines; Explring pprtunities fr expansin int new gegraphical markets, where cmpetitin is less intense and margins are ptentially higher, while deepening ftprint in existing markets; Ramp up branding/marketing initiatives such as refreshing the DD brand and leveraging n Ne Grup s t capture greater market share and slidify its market leadership as the chice fish balls brand; Develping new market segments t bring TS Grup prducts t crprates/htels/restaurants/cafes; and Increased internal crss-selling t ur Fd Catering and Fd Retail businesses. Bttm line: The management is in the midst f refining the pricing strategies t ptimise margin efficiencies as well as cnslidating and streamlining peratins such as the acquisitin f the new facility at 22 Senk Way. We hpe that the csts will start t reduce nce these prcesses and functins have been streamlined: TS Grup s current facility is perating at maximum capacity, the new and larger facility will allw sufficient space fr autmatin prjects and machinery upgrades; The new facility, unlike TS Grup s currently facility, has an existing cld rm that is expected t generate significant rental savings as TS Grup n lnger needs t rent cld rm facilities frm external parties; Cnslidatin f business functins and prcesses will allw TS Grup t reap greater cst savings and peratinal synergies; and With increased capacity, TS Grup will lk t ramp up B-t-C initiatives when the new facility is up and running; cnt d Page 3 f 5

4 Reduce financing and surcing csts by leveraging n NKK s surcing expertise; NKK is already starting t surce fr TS Grup s surimi needs and hpe t reach a sizeable scale sn fr ecnmies f scale t start kicking in; With regards t business expansin csts, ur M&A activities may incur csts in the near-term, but we are maintaining a lng-term view n ur business strategies s as t ensure lng-term sustainable grwth. We are cncurrently exercising prudence in identifying ptential M&A targets t ensure sharehlders interests are well prtected we are n the lk-ut fr value accretive, bite-size deals that add value. QUESTION ON GOVERNANCE 3. Mr Eugene Wng was instrumental in helping the grup achieve its listing. He has the relevant experience and netwrk t help the grup, especially in the fd retail segment. The grup wuld have benefitted tremendusly with him n the bard as a Nn-executive Directr in the past 4 years. We nte that Mr Wng has a near exemplary attendance at bard meetings in the first three years but, fr this financial year (page 35 in the annual reprt), Mr Wng attended 4 ut f 7 bard meetings and 3 ut f 4 audit & risk cmmittee meetings. Sharehlders wuld like t hear frm Mr Wng his cmmitment and past cntributins t the grup and hw he envisages his cntinued cntributins t the grup. Respnse: Mr Eugene Wng respnded that he is invlved in varius Bards and has been cnstantly invlved and fully cmmitted t attend Bard meetings. As disclsed in the Annual Reprt, the attendance f Mr Eugene Wng in FY2016 was nly 4 ut f 7 Bard meetings and 3 ut f 4 Audit and Risk Cmmittee Meetings as cmpared t the past years full attendance. This is due t the adhc meetings cnvened fr the purpse f discussin n tw majr acquisitins prjects which were nt able t be scheduled in advance as speed fr discussin t btain apprval is critical, unlike the 4 scheduled bard meetings t discuss quarterly/full-year financial results as required by the Catalist Rules f Singapre Exchange, which Mr Wng has attended. Mr Wng was f the view that thse adhc meetings shuld be cnvened as sn as pssible when there was qurum fr meeting presented even thugh it is nt able t accmmdate his availability. Despite f his absence at the physical adhc meetings, Mr Wng has made effrts t review and study the related issues. He had raised his questins and cmments as well as giving his valuable inputs t the Lead Independent Directr and Chairman f the Grup t facilitate the discussin s as t btain favrable and justifiable results fr the discussins. Mr Wng had als fllwed up n the discussins pst adhc meetings and cntributed his feedback where necessary. Page 4 f 5 cnt d

5 Frm the standpint f sharehlder, Mr Wng is als deemed interested thrugh his shares held in the name f Sirius Venture Capital Pte Ltd by virtue f Sectin 7 f the Cmpanies Act, Cap. 50. He cmmented that he shares the same interest f ther sharehlders t cnstantly cncern f the grwth f Ne Grup Limited. Based n Mr Wng s areas f expertise in business strategy, venture finance and F&B investments, he is truly cmmitted and cntributed his expertise and experience twards the grwth f Ne Grup s perfrmance as a Nn-Executive Nn-Independent Directr. Tgether with the Independent Nn-Executive Directrs, he aims t cntribute by challenging and acting as a balance t Executive Directrs, and be bld enugh t questin Management n behalf f sharehlders s as t mve twards achieving the business gal f the Grup, mitigating the risks. Last but nt the least, Mr Wng als serves t prmte best practices f gd crprate gvernance practice in the Grup. This annuncement has been reviewed by the Cmpany s spnsr, CIMB Bank Berhad, Singapre Branch (the Spnsr ) fr cmpliance with the Singapre Exchange Securities Trading Limited ( SGX-ST ) Listing Manual Sectin B: Rules f Catalist. The Spnsr has nt independently verified the cntents f this annuncement. This annuncement has nt been examined r apprved by the SGX-ST. The Spnsr and the SGX-ST assume n respnsibility fr the cntents f this annuncement, including the crrectness f any f the statements r pinins made r reprts cntained in this annuncement. The cntact persn fr the Spnsr is Mr Yee Chia Hsing, Head, Catalist. The cntact particulars are 50 Raffles Place, #09-01 Singapre Land Twer, Singapre , telephne: Page 5 f 5